James Bates Interview.mp4: this mp4 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.
John Shufeldt:
Everybody. And welcome to another edition of Entrepreneur Rx, where we help health care professionals own their future. Hey, everybody, and welcome back to another episode of Entrepreneur Rx. I'm excited to interview a gentleman I've known for a number of years now who is quite an accomplished CEO, entrepreneur and board member. James Bates has created and led a number of high growth tech companies. Presently, he's the CEO and founder of AdvidNOW Medical, the world's first artificial intelligence and augmented reality driven patient journey platform that nearly eliminates the administrative burden of physicians and reduces the cost of health care by more than 65%. James conceptualized this idea, wrote the fundamental patent, raised capital, recruited the team, launched the company, and still cooked dinner that evening. Previously, James was an officer at Freescale and NXP and responsible for the billion revenues of Analog and Sense Group, which was a world leader in self-driving technologies. Earlier in his career, James founded the Asia Pacific region for Silicon Labs, where he was responsible for driving growth that eclipsed 500,000,000in just three short years. James, welcome to the podcast. I've been looking forward to this one for a long time.
James Bates:
Well, John, thanks for having me.
John Shufeldt:
So you did all that before lunch?
James Bates:
Just before lunch. You know, after lunch. We have a whole bunch of other things to do. But yeah, I've been pretty lucky in my career from the beginning. I've been able to be in situations where I could actually have an opportunity to have an impact on the organizations that I've been part of. And with that, it's, you know, I've had the opportunity to live in Asia for 12 years, come back, live in the Bay Area, and then come and live in Arizona, which quite frankly, I think are just all wonderful places. So it's been fantastic to be able to leverage that opportunity.
John Shufeldt:
So let's back up even further. So you went to BYU and you have your master's in electrical engineering.
James Bates:
Correct?
John Shufeldt:
And you know, I've always said Double E's and Kenny's are the two smartest groups of people I know. And clearly that holds true for you. So you did all that for AdviNOW. Patton recruit Raise capital.
James Bates:
Yeah. So a little interesting thing about me is I grew up at a time in the 80s and the the economy wasn't great, interest rates were high. All of these things that a lot of people around the world today really don't understand or know. And so I was always nervous that I wouldn't have a job. I was always worried that I wouldn't be needed. And so my default was I'm going to choose the hardest thing to do every time. And so when I was going through college, I'm like, I want to invent something. I want to invent something. Everyone's like, Well, inventors, you know, they don't get paid. So something that people will want to hire you for. So I said, okay, electrical engineering, I'll do that. And I founded a company and we did computer maintenance, TV repair just to put myself through college. And then when I went into graduate school, my professor, I asked him, I said, What is the hardest degree that you have? What's the hardest emphasis? And he goes, Well, electromagnetics, because that requires you get a bachelor's degree in mathematics and physics at the same time. And I said, Great, let's do it. Sign me up. And so I did that all so that I could say that I did the hardest thing. And so everything else has to become easy. That was my default first out of the gate as a child and had the opportunity to join Bell Laboratories. And again, a very insecure person walking into a room with a whole bunch of Nobel laureates in New Jersey.
James Bates:
I was again humbled by the fact that I'm surrounded by a bunch of people who are 100 times smarter than me. And I'm like, okay, my smart degree from BYU is like nothing compared to these professors at MIT who have these Nobel laureate degrees. And so I continually just tried to be the best at everything I did. And when you bring that out to starting a company, I started by looking at the industry. And as I left, Freescale transacted and I started looking at the world, how do I actually impact the world? Well, health care, this was 2016 was one of the biggest issues in the market. And the ACA had just passed, or Obamacare, as people call it. And there was a whole faction that loved it and a whole faction that hated it. And there's a whole faction that had no idea if it was good or bad. And I fell into that category. So I figured I'm going to just buy some medical practices. This is going to be good for me to understand what's broken because how do I know if the ACA is good or bad? And when I dug into the actual medical practices during due diligence, I was just shocked at how poor profitability these medical practices were. Primary care, urgent care, at least in Arizona in 2016, just don't make money. We're talking low single digit EBITDA and you can't live on low single digit EBITDA unless you're an owner operator.
James Bates:
When I started looking at this, I'm like, wow, I can't buy a medical practice at low single digit EBITDA. I might as well buy a government T-bill and save myself the nightmare. But through that process, I became very involved with a chain of urgent cares and had an opportunity to do a Six Sigma cost analysis. And what that means is that I costed the practice from the beginning to the end, every single movement of every person in that practice and put a cost associated with it. When I did that, I realized that the real detriment of our health care system is the fact that physicians were spending two thirds of their time doing stuff that they didn't need to do. When you have the most expensive person, the biggest scarcity you have is the physician. And when that person is wasting their time, then ultimately nothing is cost efficient. The patients aren't happy, the physicians aren't happy, and the whole system heads for failure. That's when I looked at AdviNOW and I thought, wow, mimicking a physician's brain that should be easy and decided to write a few patents around that. And then automating the administrative aspect, wrote a few patents around that and decided that I was going to put my whole net worth into AdviNOW. So not quite sure if that's smart or not, but that's what ended up.
John Shufeldt:
So let's go back a little bit. You chose a construct that I'm not sure I've ever heard anybody say before, that you've always looked for the hardest thing to try to do because everything else from then on would be easy. It's kind of like, you know, I've never been a Navy Seal. I've read a bunch of books about them because I really admire them. But it sounds very Navy Seal esque. I picked the hardest thing to do. Where did you get that construct? Were you born with it? Is that your parents? And imbue that on you?
James Bates:
Yeah, I'd have to give that probably to my mother, which is just interesting. She's a Navy brat. My great grandfather was the head of the Pacific Fleet when Pearl Harbor happened, so he founded the Navy War College as well. After that, what was his name? His name was John P Johns.
John Shufeldt:
Okay. So it wasn't Nimitz because he was actually in acting. He was.
James Bates:
After John. Yeah.
John Shufeldt:
Got it. Okay.
James Bates:
That's Admiral John Pies. He was head of the Pacific when Pearl Harbor got bombed. And they removed him from that position because they said they you know, they blamed him, but it wasn't really his fault. So he founded the Navy War College when they sent him back to Annapolis. That's where the Navy War College comes from. If you look in, it was founded by John Pie and he's my great grandfather. But through that, my grandfather actually died in World War Two. He was a rear admiral of a U-boat. And my mom, of course, grew up in Coronado and La Jolla. They had a beach house that we would go to that they bought for $47,000 back in, you know, 1920 or something like that. And we had it all the way until my grandmother died. And, you know, in about 1992, I think, is when she passed. So, yes, that feeling of choose the hard thing. It's really interesting because I was born in a very poor area in the town of Wasco, California. And in that area of central southern California, there is areas that are very, very blue collar agriculture, oil. That's all they are in those areas. The level of education is very low. So my father has a master's degree. My mother is a professor at Bakersfield University, is where she was a professor. And so my father was the city manager of this town of Wasco, California, for a while until he ended up, you know, getting pushed out for lots of political fun.
James Bates:
That's a whole different story. But through that, we were raised to be the best that we can be, regardless of what other circumstances there are and to never have an excuse for anything. And that's just how we were raised. We lived in a town where no one had a college education, but the default for all of my parents was, You're going to be the smartest kid in the school and you're going to go get an education and you're going to do it on your own because we don't have any money to give you. And that's just by default of you. By the way, if you don't do that, you're a failure. So those expectations kind of drive that type of insecurity and movement. As I was raising my own kids, fast forward 20, 30 years. It was interesting as I was trying to instill that same level because now, you know, I'm very blessed. I live in a very nice area. There's no scarcity problems with the Bates family through my kids upbringing. So now how do I bring them up with those same levels of expectations? Because I found that they were so helpful in my life, it turned out that I have to be the hardest guy on them because no one else will be great relationships with my sons. Nonetheless.
John Shufeldt:
That's cool. I was raised somewhat similar but did not instill that in my own kids in the sense that I try to do the opposite actually. And I think it worked well for them because I'm not sure it worked all that well for me. Okay, so let's go to self-driving cars. How did you get into self-driving cars? Because as you know, I've had a Tesla forever and since 2013 and love the self-driving concept. And yet you were the one who was working on the origination of this.
James Bates:
Yeah. So Freescale Semiconductor, I joined them in 2012. Freescale is what used to be Motorola Semiconductor. Motorola Semiconductor actually founded all of the anti-lock brakes, all of the automated steering, all of the stability control, all of that technology that you've seen in cars over the past 20 years all actually came out of Freescale's relationship with General Motors, with Daimler in Europe and then Toyota in Japan. And they actually delivered that technology to the world when Motorola spun out Freescale and it became its own independent company. Then Freescale went private in 2006, right before the the bust. Well, as they went private with private equity, this is TPG, Carlyle and Blackstone are the guys who led that. They actually went into emergency mode because 50% of Freescale's revenue went away. And when you do a leveraged buyout, you have a lot of debt, you have to pay for. So through that emergency mode, they ended up cutting off a lot of the businesses and they brought me in right when the businesses started to turn around. And so my job when I joined the company in 2012 was to go through all of the technologies and figure out a way to, number one, improve profitability. But number two, bring that leadership of technology back that Motorola was known for. So we focused on two areas, and this is 2012. So it's early, but it's not too early, if you will, on electrification of vehicles and then on self-driving vehicles and the technologies required for them.
James Bates:
And we focused specifically on having experts and defining products that would enable that future. We worked with General Motors, we worked with Daimler, we worked with Toyota and everyone else, quite frankly, to make sure that we delivered the right technology that they would need. Now, Google and Tesla came along kind of later, if you will, but because we were the default technology leader, they ended up using all of our technologies to enable the differences between large established companies. And somebody like a Tesla is that Elon Musk understands the risk and he's willing to take the risk to just turn it on and see what happens. And those companies aren't right. So the interesting thing is that in 2015, when the first Autodrive Tesla came out, Mercedes-Benz had the exact same technology. They just didn't turn it on. And so Tesla turned it on. Daimler did not. Tesla became famous for it and no one else did. And they won the race right there feeling a lot of the lawsuits that Daimler was very worried about come around. But ultimately it allowed Freescale a deep relationship with Tesla and Google. And the list goes on for all of those self-driving vehicle companies because we were the technology leader and they looked to us. So we delivered the whole infrastructure. They just worked on the actual models that utilize the infrastructure.
James Bates:
Got it.
John Shufeldt:
Okay. So you were there until 2016 and there was an exit.
James Bates:
There was an exit.
John Shufeldt:
What was it? Was it a private equity exit or go public?
James Bates:
We went public again in 2012 after we went private, and then the company was sold in a transaction worth including debt, $28 billion to a company called NXP. Wow. One 8,000,000,028 with a B.
James Bates:
Yes. Wow. All right.
John Shufeldt:
So then I'm sure you're shooting yourself many days now. You decided to see if you could have an impact on health care, given your extensive knowledge of health care at the time. You know, it's kind of funny. I always think it takes somebody with a new set of glasses to come in and look at things that we all maybe just have accepted because, you know, what you said was dead on. True. Which is, you know, just to be full disclosure, why we invested. But it takes somebody with a new set of glasses to come in from an odd angle and say, well, this is kind of weird. Why are they doing it this way? Which is what you've done with AdviNOW. And just for, you know, again, disclosure, I've used that me now a lot and played with it and I try to stump it so I can rub it in your face. And I've yet to be able to stump it and I give it some weird ass things to try to figure out. And it's it's pretty darn good. So how did you get from this? Physicians are wasting 65% of their time. They're not operating at the level of their license many times. How did you take that factoid and turn it into AdviNOW?
James Bates:
Well, I looked at the reason why physicians were wasting their time. When you look at the reasons why they were wasting your time, the number one thing is a lot of documentation and clerical work requires medical knowledge. And the medical knowledge that's required doesn't require a medical degree, but it requires you kind of know what you're talking about. Right. And then you have a bunch of administrative work that requires administrative or payer understanding, and it doesn't require you to have a medical degree. It doesn't require you to have some payer administrative degree, but you kind of have to know what you're doing. And then in the end, the physician has to sign off on it all. When I looked at that, most physicians being worried that other people are going to screw it up, they just want to do it themselves, right? They're like, Hey, I can't trust that these people that don't know what they're doing are going to scribe, right? So I'm going to reread everything that was scribed for me, and ultimately they end up wasting a lot of the efficiencies that they could get from human scribes. And then on the administrative side, physicians usually just down code because they're worried about some weird lawsuit because the documentation wasn't perfect for them to code at the appropriate level. On the administrative side. So you end up with these dichotomies of all of this time being wasted.
James Bates:
But the reason they're wasting the time is because of fear. So my hope was let's create an AI that's going to collect all of the information the physician would need ahead of time and where it's going to make it transparent. We're going to allow the physician to see all the peer reviewed literature. If it's coding, we're going to go all the way down to the regulatory line item set, put them back to, you know, CMS's website, show them where this means so that they have complete transparency to trust that what we're doing is actually good for them. So building this AI, we developed a natural language processing engine that reads peer reviewed literature and it reads a peer reviewed literature. It extracts the relationships between symptoms and illnesses, illnesses, treatments, treatments and outcomes. Then we had to hire armies of physicians to come in there and rank it, because unfortunately a lot of the literature contradicts itself. It changes dramatically sometimes on what's the best standard of care. And so they had to come in there and rank the literature's relevance. And that's how we built the AI. And when we did that, we realized that physicians can trust it, they're willing to use it, and it becomes their partner in the medical field instead of them feeling burdened by other methods that people have used to try to improve physician efficiency in the past.
John Shufeldt:
Yeah, I've used it. It works phenomenally well and it's all the things we hate doing. Are you still getting pushback from physicians who are the. Well, I don't want to use AI because I will be rendered not worthwhile at some point in my career. So I'm going to put my head in the ground and hope it just goes away. Is that still pervasive or is that going away?
James Bates:
That is pretty much gone away. I mean, I have to say pre-pandemic, I probably would spend 50% of my time with physicians of aiding that concern. You're not going to be replaced. This is making you efficient. You don't want to do this work anyways. Just allow this. And so physicians were very concerned when the pandemic hit the level of burnout and the regulatory increase in what they were required to document and the penalties that increased with the pandemic with them not documenting it correctly, actually got to a point where I don't see physicians pushing back at all at this point with that concern.
John Shufeldt:
That's awesome. Yeah, it's funny how much the pandemic has this unintended consequence and certainly there is significant about folks my age basically saying, you know what, I'm tapping out. You know, I survived the pandemic and I'm out because I think a lot of folks my age and younger and certainly older have said, I'm hanging up the Spurs because I've seen it all. I'm hoping that through the use of AI, which I know is your ultimate game plan, is that physicians get reinvigorated because we'll be spending more time actually doing the work we love to do as opposed to doing the work we loathe.
James Bates:
Exactly. This is what we see with the physicians who actually have used the platform is exactly that. They get to spend more time with their patients, not less. So another big concern people had is they're like, wait a minute, do patients really want to use a chat bot to collect all the information? Don't they want to talk to a human? Don't they want to talk to the physician? But the problem was the physicians were going so quickly with their head buried in the computer, it wasn't really that human interaction that that patients long for. And so now that the AI is actually working in partnership with the physician, the physician actually can create that bond with the patient and make them feel comfortable about what's happening and help ease some of their fears.
John Shufeldt:
Yeah. And I've noticed that because it allows you to spend much more face to face quality time. And even if it's just five minutes, it's not ten minutes where my face is in the computer typing 23 words a minute and looking up every so often at the patient. Now it's five minutes focused on them, sitting down and asking them questions, and all of a sudden I walk out of the room and the charts done and different diagnoses are suggested. And if you pick this diagnosis, here's a treatment plan for it and the discharge instructions and you're like.
James Bates:
Exactly, Wow.
John Shufeldt:
This has become much easier. It's pretty cool. What has been the biggest aha moment for you as you delved into the medical world?
James Bates:
More than a ha. It's been a surprise. Everybody will agree to something, but it's still a very slow process to adopt it. And I know a lot of that is built for safety purposes. There's a lot of committees people have to go through to be able to approve something and get it in use in a large hospital system. The thing that amazes me is there's not a single person around the table who doesn't say this is the future of health care. Everybody says, yes, this is the future of health care, but for some reason it still takes forever to get adopted. It starts with a small trial. Then the trial gets expanded. Then it goes step by step by step. And I look at this and I think, well, through this process, probably they're never going to adopt something that's going to screw people up. Wonderful. But how many people actually are missing out on the benefits of health care because they're taking so long to adopt it? And so for me, that was really my ignorance coming into the medical field from the outside. That's really just going to be how it is, regardless of how great the technology is, regardless of what awesome relationships you have, none of that's going to be able to push the rope. So you just have to incentivize the people to pull the rope and then the rope is going to progress at the time it takes. And that's been my biggest really surprise through this whole process.
John Shufeldt:
Yeah, I mean, I think that's true. And for the physicians listening, if you become a first mover, if you can react more quickly than the rest of the market, you will be ahead of the game. And it's not hard to react more quickly than others in health care because we tend to move, as you said, very slowly. I just remember in the urgent care days, people were saying, well, what's an urgent care? You know, why would I go there? And then the telemedicine day is like, I'm not seeing a doctor on the computer. And now, of course, we laugh and roll our eyes because of course we do it every day. But at the time, I mean, it was you know, it was a seven year struggle trying to get people to do this.
James Bates:
Absolutely. Well, we're very excited with the traction that we have. We can talk about Mayo Clinic because we were part of the Mayo Clinic accelerator and we're one of the companies that they have publicly announced. I'm looking at our relationship with them as it continues to expand as well as other large health systems. But now many small organizations that are even down to a single provider are taking advantage of the platform so that they can provide better care. The physicians actually have more of a work life balance and they get to do the things that they really love rather than the things that they consider a burden, right?
James Bates:
I mean.
John Shufeldt:
The ROI on it is remarkable. Lyle Berkowitz was on earlier, talked about this very thing, and he said, I don't see it as taking physicians jobs away. I see it as allowing physicians to actually go deeper on the patients they see. It's not all. I can see ten more patients, and so I can spend more quality time with patients to really get that benefit of the doctor patient exchange and interaction. We all went to medical school to be a part of this, not to just grind. And that's how he sees AI progressing and I'd have to agree with that. I thought he was very eloquent in that description. Well, what's down the path for you? Where is this going to go?
James Bates:
The next few years are very exciting for us. We're making great progress. We expect to grow and be adopted in a very large manner. In the startup world. When you start growing, you have two options. Somebody is going to come and offer to buy you or you. You decide you're going to go grow and do it on your own. I would say the highest probability is someone will probably buy us. I'd love to see this technology be levered in a way that AdviNOW on its own, can't do. We're excited to see where that leads us with ChatGPT.
John Shufeldt:
For now, it's become not quite commonplace, but it's certainly getting there. Do you see that as a help or is that as a competition?
James Bates:
Oh, it's a help for us. The interesting thing for me is when ChatGPT came out, I had all of my large hospital system. Clients would came in and they're like, okay, James, what is Aveeno's answer to ChatGPT? And I'm like, Well, ChatGPT is not really a competitor. Why don't you play with it? Just log in, have it solve something for you, and we can decide if it's a competitor or not. I knew the answer already when I told them that because I'd done that and they all came back and they said, Yeah, this isn't really usable. And I said, Of course it's not. So the thing that ChatGPT could do, which we don't really do and once now adopted and wide scale format is unnecessary, is they could take a paragraph that's written by a physician and summarize it into some nice bullets. Totally something ChatGPT could do. But if you wanted to actually eliminate the need for the physician to write the note in the first place. Chatgpt is not going to do that. And so when you look at where medicine has to go, physicians can't be the ones to collect all the information. They can't be the ones to ask every question, close every care gap, place, every order. The AI must do that. Well, ChatGPT doesn't even pretend to do that.
James Bates:
And then you'd say, okay, the physicians. Now that's all done by AI. What is the physician note? Well, the physician note is just a summary of all of that data collected with the physicians. Conclusion justification based off a peer reviewed literature. Why this illness was chosen. This one wasn't. And and then the treatment plan and why it was chosen. And the AI can correlate that all back to peer reviewed literature. So when you get back to what is the physician actually drafting in their note, that's new. There's not a lot there. So actually the idea that you're going to have some type of voice to text or you're going to have some summary that ChatGPT is going to drive up, you know, it's companies like Nuance that do voice to text and say they chart through the whole encounter process all of those become unnecessary. Now, there will always be a need for a physician to add context to the note. That's very important aspect of the note. It's not just clinical in nature, it's actually situational and that the physician will always need to add. But that's essentially dragon. You don't need something more than that. It's really just voice to text as a physician is adding their contextual summary onto a clinical note that was already drafted by the AI.
James Bates:
Yeah, it's.
John Shufeldt:
Medical decision making and tying it all together and hopefully that comes out in the same construct as the peer reviewed literature. And you say, Great, I've tied the you're done. Exactly. I've tied the bow. It's all done. Well, that's very cool. What advice do you have? Because there will be people listening to this who say, that is badass. I want to be involved. I want to do something at that scale. What advice do you have for people who don't have their master's in electrical engineering, but they want to get into healthcare in a in a very direct way?
James Bates:
The most important thing is you. You have to find a problem that is a real problem and is defined to be a problem. There's a lot of people that go into health care who have great ideas, like, I don't want to call around and find the right doctor. Okay, great. Well, who is going to compensate you to put you with the right doctor? Well, obviously, the insurance company will want to get you with the cheapest physician or, you know, you can go through different people who want to do certain things. But when you look at many times what's good for the patient isn't being compensated elsewhere. So what you have to be able to do is find a way to make sure that the stakeholders, which ultimately are the physician themselves, the hospital system and the insurance company, right. These are the stakeholders in the health care system. Once you've managed that, every single stakeholder can win. That's when you have a product. If you go in there and say this stakeholder is going to lose, your product isn't going to be successful in the health care world, somebody will kill it. So that's my number one advice, is choose your problem very carefully if you want it to be successful.
James Bates:
The second is. Be ready to raise a lot more money than you thought you needed. Ultimately, this has been my biggest pain. I mean, I've put almost $10 million of my own money into this venture. A huge amount. Far more than I wish I needed to. But ultimately, all of this is going into this venture because it just takes that long. And if you're solving a fundamental problem in health care, it's just going to take a long time. There's really no way to push that rope. So that would be the second piece of big advice. And the last piece of advice is don't get discouraged. You're going to have great days, you're going to have crap days, and you just have to be resilient. Keep a smile on your face and get up and go climb that mountain every day. Ultimately, you just got to go do it. And if you look at yourself and you say, I can't do that for five years, then don't get in the health care startup business. Just don't do it.
John Shufeldt:
Yeah, that's very sage advice. I know it's advice you've lived through because there are plenty of days when you're just thinking, Just kill me, please, God.
James Bates:
And I've had a few of those. Yes.
John Shufeldt:
And then you get up, shake it off and like, All right, I'm back. Do you ever watch that show? Silicon Valley?
James Bates:
I love that show.
James Bates:
That's because when.
John Shufeldt:
I watch that show, I gotta admit, I think of you often because of all the I know the history of all the times. It's so close and then it just blows up. That show kills.
James Bates:
Me. Exactly.
James Bates:
I've lived through it.
James Bates:
Yeah.
John Shufeldt:
You've lived through it. Well, James, this has been great. How can people get Ahold of you and learn more about Adobe now and about you?
James Bates:
Yeah. I would welcome anyone who's interested in really automating the medical visit with artificial intelligence, taking their EBITDA from low single digits, which is kind of where a lot of primary care and urgent care live to greater than 30 to 40%. That's what our clients have done. Reach out to James Bates at james.bates@advinow.com And go to AdviNOW's Website W-w-w . A-D-V-I-N-O-W .COM. We'd be happy to support you. Anyone from a single clinic operation to of course large hospital systems can use and take advantage of the product.
John Shufeldt:
So true. Well said. Well, thank you very much. I've had a great time.
James Bates:
Thanks a lot, John. I really appreciate the time.
John Shufeldt:
Well, thanks, folks for listening. Thanks for listening to another great edition of Entrepreneur to find out how to start a business and help secure your future. Go to JohnShufeldtMD.com. Thanks for listening.
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